DeLong v. Bank of America, N.A.

Filing 17

ORDER by Judge Lucy H. Koh finding as moot 7 Motion to Dismiss; denying 15 Motion for TRO; denying 16 Motion for Preliminary Injunction (lhklc2, COURT STAFF) (Filed on 1/23/2012)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION United States District Court For the Northern District of California 10 11 12 13 14 ANGELA DE LONG, Plaintiff, v. BANK OF AMERICA, N.A., POLYMATHIC PROPERTIES, INC., and DOES 1 TO 100, inclusive, 15 Defendants. 16 ) ) ) ) ) ) ) ) ) ) ) Case No.: 11-CV-06388-LHK ORDER DENYING EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER; DENYING MOTION FOR PRELIMINARY INJUNCTION; ORDER TO SHOW CAUSE 17 Before the Court is Plaintiff Angela De Long’s (“Plaintiff”) ex parte application for a 18 temporary restraining order (“TRO”) as well as a motion for a preliminary injunction, both seeking 19 to enjoin Defendant Polymathic Properties from “selling, transferring, disposing, hypothecating, or 20 encumbering” the condominium located at 108 Path Way, San Jose, California (“the 21 condominium”) and allowing Plaintiff to remain in possession of the condominium pending 22 resolution of this matter. Ex Parte TRO Application at 1, ECF No. 15; Mot. for Prelim. Injunction 23 at ii, ECF No. 16. For the foregoing reasons, Plaintiff’s TRO application and motion for a 24 preliminary injunction are DENIED. Additionally, the Defendant is ORDERED to show cause 25 why this case should not be remanded to state court because this Court lacks subject matter 26 jurisdiction. 27 I. BACKGROUND 28 1 Case No.: 11-CV-06388-LHK ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER On November 19, 2004, Plaintiff and her husband, Jamie Sandoval, entered into a home 1 2 mortgage loan agreement with Defendant Bank of America, N.A. (“Bank of America”) in 3 connection with the purchase of the condominium. First Amended Complaint (“FAC”), ECF No. 4 13. The principal amount of the loan was approximately $363,750.00. FAC ¶ 7. At some point in 5 either June 2009 or early 2010, Plaintiff contacted Bank of America about the federal Making 6 Home Affordable Program seeking a loan modification. De Long Decl. in Support of Preliminary 7 Injunction (“De Long Decl.”) ¶ 10, ECF No. 15-1; FAC ¶ 12. Plaintiff signed a Trial Period Plan 8 under which she was to make three trial payments before Bank of America would determine if she 9 qualified for a loan modification agreement. De Long Decl. ¶ 11. According to the Trial Period United States District Court For the Northern District of California 10 Plan Agreement:1 “the Plan is not a modification of the Loan Documents and . . . the Loan 11 Documents will not be modified unless and until (i) I meet all of the conditions required for 12 modification, (ii) I receive a fully executed copy of a Modification Agreement, and (iii) the 13 Modification Effective Date has passed. I further understand and agree that the Lender will not be 14 obligated or bound to make any modification of the Loan Documents if I fail to meet any one of 15 the requirements under this Plan.” De Long Decl. Ex. A. Under the terms of the Trial Period Plan, 16 Plaintiff was required to make modified payments in September 2009, October 2009, and 17 November 2009.2 See De Long Decl. ¶ 12; Ex. A. Plaintiff maintains that she made the three3 trial 18 payments as required pursuant to the terms of the Trial Period Plan Agreement. De Long Decl. ¶ 19 12. In November 2009, Plaintiff’s husband moved out of the condominium. De Long Decl. ¶ 8. 20 In September 2010, Bank of America informed Plaintiff that she was not being approved 21 for a loan modification because she had defaulted on the trial payments. De Long Decl. ¶ 14. 22 Although Plaintiff was able to appeal Bank of America’s decision, she was required to reapply for 23 the Trial Payment Plan. De Long Decl. ¶ 15-16. Through subsequent correspondence with Bank of 24 1 25 26 27 28 Confusingly, Plaintiff has attached an unsigned form copy of the Trial Period Plan. See De Long Ex. A. It is not apparent from the face of the document, that the agreement was actually executed. 2 The FAC and Plaintiff’s Declaration and Exhibit A diverge significantly on this point. The FAC indicates that De Long made trial payments of approximately $1,600 per month from April 2010 to September 2010, while De Long’s Declaration, and Exhibit A, indicate that she made trial payments of $1,782.50 in September 2009, October 2009, and November 2009. 3 It is unclear based on De Long’s declaration whether she was required to make three or four trial payments. De Long Decl. ¶¶ 12-13. 2 Case No.: 11-CV-06388-LHK ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER 1 America, De Long was informed that she was not eligible for loan modification, and the 2 foreclosure sale of the property would no longer be on hold.4 De Long Decl. ¶¶ 19-25. On 3 September 27, 2011, a trustee’s sale was held to foreclose on the deed of trust. FAC ¶ 27; FAC Ex. 4 C. Bank of America purchased the condominium for $182,250.00. FAC Ex. C. On November 7, 2011, Plaintiff filed a state court action against Bank of America in Santa 5 6 Clara County Superior Court. Plaintiff apparently5 brought several state law claims against Bank 7 of America arising out of the loan transaction related to the condominium. ECF No. 1. Bank of 8 America removed the case to federal court based on diversity and federal question jurisdiction on 9 December 16, 2011, and filed a motion to dismiss on December 22, 2011. ECF Nos. 1 & 7. On United States District Court For the Northern District of California 10 December 21, 2011, Bank of America executed a grant deed conveying title to the condominium to 11 Polymathic Properties, Inc. See FAC Ex. D. On January 11, 2012, Plaintiff filed a First Amended 12 Complaint6 alleging claims for breach of contract, breach of the implied covenant of good faith and 13 fair dealing, negligence, cancellation of trustee’s deed upon sale, fraud, and fraudulent conveyance 14 against Bank of America, and seeking to impose a constructive trust on the condominium against 15 Polymathic Properties as a result of the alleged fraudulent conveyance from Bank of America to 16 Polymathic Properties. ECF No. 13. Plaintiff filed the instant ex parte TRO application and 17 motion for a preliminary injunction on January 18, 2012. See ECF Nos. 15 & 16. 18 II. LEGAL STANDARDS 19 The standard for issuing a TRO is identical to the standard for issuing a preliminary 20 injunction. Brown Jordan Int’l, Inc. v. Mind’s Eye Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D. 21 Haw. 2002); Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co., 887 F. Supp. 1320, 1323 22 (N.D. Cal. 1995). “A plaintiff seeking a preliminary injunction must establish that he is likely to 23 succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary 24 relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” 25 4 26 27 28 Plaintiff has not indicated when the foreclosure proceedings were initiated. Although the notice of removal references the original state court complaint. It does not appear that the original complaint was properly e-filed in this case. 6 Because Plaintiff filed a First Amended Complaint as permitted pursuant to Federal Rule of Civil Procedure 15(a)(1)(B), Bank of America’s Motion to Dismiss is DENIED, without prejudice because the motion is moot. 3 Case No.: 11-CV-06388-LHK ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER 5 1 Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008). The party seeking the 2 injunction bears the burden of proving these elements. Klein v. City of San Clemente, 584 F. 3d 3 1196, 1201 (9th Cir. 2009). The issuance of a preliminary injunction is at the discretion of the 4 district court. Indep. Living Ctr. v. Maxwell-Jolly, 572 F.3d 644, 651 (9th Cir. 2009). 5 Federal Rule of Civil Procedure 65(b)(1) states that a court may issue a temporary 6 restraining order without notice to the opposing party only if: “A) specific facts in an affidavit or a 7 verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to 8 the movant before the adverse party can be heard in opposition; and B) the movant’s attorney 9 certifies in writing any efforts made to give notice and the reasons why it should not be required.” United States District Court For the Northern District of California 10 Additionally, Civil Local Rule 65-1(b) states that, unless relieved by the Court for good cause 11 shown, “on or before the day of an ex parte motion for a temporary restraining order, counsel 12 applying for the temporary restraining order must deliver notice of such motion to opposing 13 counsel or party.” 14 III. DISCUSSION A. Procedural Deficiencies of the TRO Application 15 Plaintiff’s ex parte TRO application fails to comply with both the federal and local rules 16 17 governing ex parte TRO applications. For example, Plaintiff’s attorney did not submit an affidavit 18 establishing that the attorney gave notice to the defendant of the TRO Application as is required 19 under Federal Rule of Civil Procedure 65. Moreover, Plaintiff has also not established that she has 20 complied with Civil Local Rule 65-1 by delivering notice of the TRO to opposing counsel or to the 21 opposing parties. This leaves the Court uncertain as to whether Defendants, particularly 22 Polymathic Properties, are even on notice that the TRO was filed. For this reason, the Court 23 DENIES Plaintiff’s ex parte TRO application. B. Merits of the TRO and Preliminary Injunction 24 Plaintiff also fails to establish that she is entitled to a temporary restraining order or 25 26 preliminary injunction based on the merits of her claim.7 Because Plaintiffs seeks to enjoin only 27 7 28 As an initial matter, the Court notes that Plaintiff fails to cite any case law to support her argument that she is likely to succeed on the merits of the claims alleged in the FAC in both her ex parte TRO application and the motion for a preliminary injunction. 4 Case No.: 11-CV-06388-LHK ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER 1 Polymathic Properties from selling transferring, disposing, hypothecating, or encumbering the 2 subject property, Plaintiff must establish that she is likely to succeed on her claim that Bank of 3 America fraudulently conveyed the condominium to Polymathic Properties. See Cal. Civ. Code, § 4 3439.07; Mejia v. Reed, 31 Cal. 4th 657, 663 (2003) (“A finding of a fraudulent conveyance allows 5 defrauded creditors . . . to reach property in the hands of a transferee.”). 6 Under California’s version of the Uniform Fraudulent Transfer Act (“UFTA”), a transfer is fraudulent if it is made “[w]ith actual intent to hinder, delay, or defraud” any creditor of the 8 transferor. Cal. Civil Code § 3439.04(a). A defrauded creditor may seek to have such a transfer 9 voided to the extent necessary to satisfy the creditor's claim. See Cal. Civil Code § 3439.07(a)(1). 10 United States District Court For the Northern District of California 7 However, a transfer made fraudulent by the transferor's intent may not be voided against a person 11 “who took in good faith and for a reasonably equivalent value.” Cal. Civil Code § 3439.08(a). 12 Even assuming that the Plaintiff is a “creditor” within the meaning of CUFTA, Plaintiff has 13 not established that the transfer of the condominium deed was made with intent to defraud or was 14 not made for reasonably equivalent value of the property. Other than the timing of the transfer in 15 relation to the filing and prosecution of the instant civil suit, there is no indication that the transfer 16 of the deed was with the intent to defraud. Plaintiff has offered almost no evidence to support her 17 allegation that the transfer was intended to defraud. See Cal. Civ. Code § 3439.04(b). Moreover, 18 other than a bare allegation that the transfer was made “for inadequate consideration,” Plaintiff has 19 offered no evidence regarding the terms of the transfer of the deed from Bank of America to 20 Polymathic Properties. See FAC ¶ 83. There is no evidence that Polymathic Properties did not 21 take the property for a reasonably equivalent value. Therefore, Plaintiff has failed to show that she 22 is likely to succeed on the merits of her claim for fraudulent conveyance against Bank of America, 23 and that a constructive trust should be imposed on the property against Polymathic Properties. 24 Therefore, Plaintiff’s TRO Application and motion for a preliminary injunction are DENIED. 25 IV. ORDER TO SHOW CAUSE 26 After reviewing the FAC, the notice of removal filed by Bank of America, and the 27 supporting papers, the Court has doubts regarding whether it has subject matter jurisdiction over 28 this case and believes that remand to state court may be appropriate. First, it does not appear that 5 Case No.: 11-CV-06388-LHK ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER 1 federal question jurisdiction exists because Plaintiff has alleged no federal cause of action, nor does 2 it appear from the face of the complaint that Plaintiff’s right to relief depends on resolution of a 3 substantial question of federal law. See 28 U.S.C. §1331; Proctor v. Vishay Intertechnology Inc., 4 584 F.3d 1208, 1219 (9th Cir. 2009) (“A case ‘arises under’ federal law within the meaning of § 5 1331 if ‘a well-pleaded complaint establishes either that federal law creates the cause of action or 6 that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of 7 federal law.’”) (citations omitted). 8 Second, it appears that complete diversity between the parties may no longer exist in light of Plaintiff’s addition of Polymathic Properties as a Defendant in this matter. Caterpillar Inc. v. 10 United States District Court For the Northern District of California 9 Lewis, 519 U.S. 61, 68 (1996); FAC ¶¶ 1 & 3. Because Plaintiff has amended her complaint and 11 effectively destroyed diversity jurisdiction, remand to state court may be appropriate in this case. 12 28 U.S.C. § 1447(e) (“If after removal the plaintiff seeks to join additional defendants whose 13 joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and 14 remand the action to the State court.”). Accordingly, the Court ORDERS Defendant to show cause 15 why this case should not be remanded to state court for lack of subject matter jurisdiction. 16 As the party invoking federal jurisdiction, Defendant Bank of America has the burden of 17 showing that jurisdiction is proper. See Thornhill Publishing Co. v. General Tel. & Electronics 18 Corp., 594 F.2d 730, 733 (9th Cir. 1979). Therefore, by February 20, 2012, Bank of America 19 shall file a brief, no longer than fifteen pages, explaining why the Court has subject matter 20 jurisdiction over this case. Plaintiff may file a response, no longer than fifteen pages, indicating 21 her position on the issue, by March 12, 2012. A hearing on the matter will be set for May 3, 2012. 22 The Court will attempt to resolve the issue on the papers before the hearing date. 23 IT IS SO ORDERED. 24 Dated: January 23, 2012 25 _________________________________ LUCY H. KOH United States District Judge 26 27 28 6 Case No.: 11-CV-06388-LHK ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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